Multi-Asset Weekly Newsletter

Global Developments & Global Equities 

2ND APRIL IN FOCUS AS RECIPROCAL TARIFFS TO COME INTO EFFECT

President Trump announced a 25% tariff on auto imports this week. It also applies to cars of US auto companies assembled overseas and imported into the US. Trump announced a 25% tariff on countries importing Venezuelan crude. Trump softened his stance on reciprocal tariffs a bit. He said certain countries could be given concessions. Developments and announcements over the weekend will be tracked closely, as we approach 2nd April, the date when reciprocal tariffs are to come into effect. US Fed's preferred inflation gauge rose more than expected, and consumer spending rose less than expected in February. The market is pricing in almost 3 Fed cuts by the end of 2025. 

NIFTY V/S GLOBAL MARKETS

Below is how major global indices performed this week:

FIXED INCOME: 

Yield on the US 10y ended 9bps lower at 4.25%. 2y yield was down 12bps at 3.91%. 10y Yields across the Eurozone and the UK were down 2- 5bps this week. Yield on the India benchmark 10y ended 4bps lower at 6.58%, the lowest level since Jan'22. The government announced the H1 FY26 borrowing calendar in which it pegged the gross borrowing at Rs 8 lakh crs (54% of what it intends to borrow for the entire fiscal, i.e., Rs 14.8 lakh crs). This amount was lower than what the market was expecting. In FY25, the government borrowed Rs 14 lakh crs through dated securities, Rs 7.4 lakh crs in H1 and Rs 6.6 lakh crs in H2. Drop in US treasury yields combined with RBI OMOs and lack of supply in March have resulted in a rally in bond markets. Also there is an expectation that recent Rupee strength could give RBI more leeway to run a more accommodative monetary policy. 1y OIS ended 5bps lower at 6.04% and 5y OIS rose 3bps to 5.90% this week. FPIs bought USD 4.3bn of domestic debt in March. Purchases under the FAR route were the highest ever at USD 3.3bn. 

FOREIGN EXCHANGE 

Among G10 currencies Scandinavian currencies were the best performers against the Dollar. SEK gained 1.3% and NOK 0.7% against the Dollar. Kiwi Dollar (-0.3%) and JPY (-0.4%) were the underperformers. Among Asian currencies, Indian Rupee (+0.6%) was the only currency that strengthened. IDR, MYR and SGD all weakened 0.4% this week.
Since 10th Feb, when the Rupee hit an all-time low of 87.95, it has strengthened by anywhere between 1% to 3.6% against its Asian peers. It ended the financial year at 85.47, 3.1% weaker compared to the last March close of 82.91. Return of FPI flows into domestic equities, improving Current Account Dynamics, clampdown on arbitrage trades, overall Dollar supply towards financial year end, absence of central bank on the bid, and relatively low crude prices have all contributed to Rupee strength. FX Reserves rose USD 4.5bn in the week ended 21st March to USD 658.8bn. 1y forward yield is at 2.20%, 3y at 2.50% and 5y at 2.78%. All those who participated in the swap auction this week and paid 3y points are making gains of about 60p. 

COMMODITIES: 

Brent was up 2% for the week at USD 73.6 per barrel as Trump administration announced tariff of 25% on countries buying Venezuelan crude. LME Aluminum was down 2.9% and Copper 0.6% for the week. Gold surged to yet another all time high and ended the week 2.1% higher at USD 3085 . Silver rose 3.3% this week to USD 34.1.